A new survey by EY claims consumer confidence in renewable energy follows a similar pattern across markets: rising initially amid optimism and positive sentiment, before falling sharply as “the impact hits home”.
“From consumers in the European markets, who in general have been on the energy transition journey longer, we know that as the journey progresses from being theoretical to becoming practical encompassing scale, complexity and disruption, consumer confidence sharply declines,” says Eric Jost, EY’s Asean energy leader. “Therefore, for the Asean energy transition journey to progress differently, policymakers and energy providers need to refine their strategy.”
Income plays a role in shaping attitudes. Consumers with lower incomes exhibit lower levels of confidence, says EY of its Energy Consumer Confidence Index (ECCI), which draws upon research of 36,000 residential energy consumers across 18 markets.
Mark Bennett, EY’s Asia-Pacific energy and resources customer experience transformation leader, thinks this reflects a sense of being left behind and the inability to afford or access new energy solutions, such as rooftop solar panels, home battery storage and electric vehicles (EVs).
Conversely, the focus on higher-income consumers as early adopters of these solutions could mean limited options for individuals with lower incomes to actively participate in the energy transition and reap its benefits, says Bennett to The Edge Singapore.
With time, however, the realities of the new energy world will take hold, says EY, and consumers see value in the changes around them. Confidence then begins to rise.
See also: JPMorgan pursues deals to finance shutdown of coal-fired power
“Building and maintaining consumer confidence throughout the energy transition journey will be an important determinant of a market’s ability to achieve, or accelerate, decarbonisation goals,” says Jost.
Most Asean countries are at the start of their energy transition journey, where consumers are likely at the “peak of expectation”, Jost adds. “Energy transition journeys are marathons that require a concerted effort by the industry, policymakers and regulators to collaborate closely together to maintain consumer confidence and support over the next 20 years or more.”
Singapore and other Asean countries can learn from the experiences of countries that have made significant progress in their energy transition journeys, and approach certain aspects differently while working towards their own net-zero commitments, says Jost to The Edge Singapore.
See also: Indonesia’s ‘ambitious’ net zero, coal phase-out plans ‘challenging’ in reality: BMI
Consumer confidence
EY’s ECCI study identifies some factors that influence consumer confidence — areas which the consultancy thinks the energy industry, policymakers and regulators should focus on throughout the energy transition journey.
According to EY, the research does not show any links between energy market competition and consumer confidence. “In fact, most of the markets that rank higher in the EY ECCI exhibit limited energy competition, says Bennett.
While it can be argued that energy market competition brings many benefits, the competition has resulted in a “confusing array” of consumer options, he adds. This is in addition to price volatility and failures among energy companies — all of which appear to have further eroded consumer confidence.
That said, 89% of EY ECCI respondents in Asia-Pacific expressed a desire for their energy provider to play an even bigger role in helping them navigate the energy transition. “Therefore, maintaining a stable energy market will provide consumers the confidence to make investments in energy transition. Furthermore, offering consumers a smaller number of appropriate options will help them in making decisions and committing to a particular course of action. Both factors will be important for Singapore’s energy consumers in the years ahead,” says Bennett.
Income is another factor. Lower-income consumers will prioritise affordability over sustainability, so the primary motivation for engagement should centre around “Help me save money” rather than “Help me save the planet”, says Bennett.
Accelerating the availability of products and services that establish a stronger connection between energy use and cost is an important first step, he adds. “This could involve leveraging existing investments in smart metering and digitisation of the electricity grid, such as offering energy prepayment, time-of-use and green tariffs. These measures enable consumers — irrespective of income levels — to save money while contributing to environmental sustainability.”
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
According to the International Renewable Energy Agency (IRENA), nearly US$1 trillion of investment will be required through 2030 for the energy transition. Singapore will likely require its fair share of that investment, says Bennett. “Ultimately, the cost of the energy transition and investment funding will be borne by consumers, whether through energy tariffs, taxes, levies and subsidies, or by making new product purchases, such as rooftop solar panels and electric vehicles (EVs).”
Nearly half of consumers in Asia-Pacific (45%) express a willingness to pay more for sustainable energy products and services, he adds. “It is reasonable to assume that if consumers are expected to pay higher energy costs, especially in the medium term, they should expect greater value from their energy providers.”
Communicating this change to consumers is another hurdle. “Consumers often find it complex to navigate the energy transition in part due to new and poorly-understood terms, such as net zero, along with poorly-understood units of measurements, such as megawatts,” says Bennett.
Consumers also show limited awareness as to which products and services are most relevant to and applicable for their lifestyles, he adds, and a limited understanding of the affordability and benefits of energy transition products and services. “In short, consumers are neither able to understand nor access the value created by energy transition.”
To help and create value for consumers, the energy industry and regulators must address all their questions and concerns to help them navigate energy transition confidently, says Bennett. “In doing so, they can create the consumer confidence required to accelerate the transition.”
